I was just reading “How to Use Currency Crosses to Trade the Majors” in Babypips School of Pipsology.
In that it mentions…
Let’s say you’re bearish on the U.S. dollar. How will you trade?
Can somebody please explain that?
How can you be bearish on USD and buy USD/CHF or USD/JPY?
Two questions in one.
I suspect a drafting error in the wording. If you are bearish in the USD you would want to sell USD/XXX or buy XXX/USD.
So let’s suppose the word should have been bullish, rather than bearish. But it’s a good question - how does checking CHF/JPY tell you which USD-based pair against one or the other tell you which one to buy. It’s simple - if CHF/JPY is rising, then CHF is stronger than JPY, JPY is weaker than CHF. So as your target buy trade benefits from a strong USD and a weak counter currency, the weaker the counter currency the better for you. So you would buy USD/JPY.
And of course if CHF/JPY was falling, you would buy USD/CHF.
If you’re bearish on the U.S. dollar, you might consider trading pairs like CHF/JPY to indirectly express your bearish view on USD, as both CHF and JPY tend to move against the dollar.
Yes. That’s what I was thinking.
Thank you for the clarification.